Saudi Arabia’s government reshuffle in early May is more than a political watershed. The conservative Kingdom, at the heart of the Arab-Islamic world and one of the world’s key oil producers, is in the midst of a fundamental restructuring process that centers around the country’s large, but oil-dependent economy.

While there is little prospect for political reform on a wider scale — Saudi Arabia is and remains a traditional monarchy with limited public participation in policymaking — the current reform process is an important one, and one indicative of the sort of the socio-economic challenges the Gulf oil producers increasingly face.

What caused it?

It is worth looking back at the past months to understand the extent of the current Saudi reform effort. In early 2016, the country began a process of reviewing multiple economic sectors, including energy, labor markets, pensions, and health. For example, in January 2016, Saudi Arabia announced far-reaching cutbacks of domestic subsidies for energy and water, a political no-go area for politicians across the region only a few years ago. After all, oil, energy and the state’s capacity to look after its citizens through jobs, subsidies, and cheap energy has been a core element in Saudi society’s and other Gulf oil producers’ political economy for many decades. Then, in March, the Kingdom announced Vision 2030, a comprehensive reform plan aimed to wean Saudi Arabia off its long-term dependence on oil, sooner rather than later.

In line with these steps, many of which have broken with decades of established policymaking inside the Kingdom, there have also been major changes to Saudi government structure and personnel, signaling the current leadership’s drive to ostensibly move ahead with more policy reform at the top. For example, this includes the replacement of Saudi oil-veteran Ali Al Naimi as Minister of Petroleum, a position critical to world oil market dynamics, with Khalid Al Falih, Minister of the newly created department of Energy, Industry and Mineral Resources. It merges the responsibilities formerly held by the Ministry of Petroleum with some of those held by the now abolished Ministry of Electricity and Water.

Why now?

The timing for these reforms is no accident. Saudi Arabia’s vast global role on oil markets as a major producer, exporter, and decision-maker within OPEC is reciprocal; the country relies on oil exports for over 90% of its government revenue, making the Saudi budget, and hence the state itself, exceptionally dependent on this one source of revenue. Large swings in global oil prices affect Saudi Arabia deeply, as the country’s oil export revenue stream determines its own financial strength, and hence its ability to uphold the country’s unwritten historical bargain by which citizens pledge political allegiance to the state in return for a share in the country’s oil wealth.

Saudi Arabia’s vast foreign reserves, estimated by the IMF at around $570 billion in March 2016, can shield the country from the immediate consequences of falling oil prices for several years still to come. But it is evident, clearly even to internal policy circles, that running down the country’s foreign reserves while the economy continues under business-as-usual is not a viable long-term option. In the time period of March 2015 to March 2016, the Saudi government withdrew over $100 billion from its foreign reserves – nearly a sixth of the fund’s total value just a year ago.

Will the reforms work?

Not all outside observers are convinced that the Kingdom’s recent reform steps, including its newly launched Vision 2030, will work. The core of the problem is that, quite understandably, grand visions and government-led plans and targets can only achieve so much, especially in a large and demographically complex economy like Saudi Arabia. Unlike in the smaller Gulf states such as the UAE, Qatar, and Kuwait, Saudi Arabia has a comparably large, regionally and economically heterogenous society to manage. In addition, it has to contend with vast, inherited industries, and education- and labour-market structures that will take many years to reform.

Moreover, the idea that economic progress makes many better off and nobody worse off is a fallacy that many policymakers propagate in their message to the people. There is no such thing as a pain-free economic reform process, including in Saudi Arabia. This is why the coming years – Vision 2030 Phase II if you will – is the far more complicated aspect of the reform process. Translating targets into policies, responding to a changing economic environment including shifting popular expectations — all with a realistic evaluation of which parts of the economy would actually benefit from less rather than more state interference — is no longer something that can be carried out via central state decree. For this, Saudi Arabia will require a capable, accountable, and professional bureaucracy.

Paradoxically, although low oil prices have spurred much of the change, they are also likely to inhibit the rate at which Saudi Arabia can diversify its economy. Because of Saudi Arabia’s long “addiction to oil,” as the country’s Deputy Crown Prince Mohamed Bin Salman described it in a recent interview, financial resources and human capital have systematically been driven away from the kind of sectors that could one day render Saudi Arabia independent of oil revenues. Low government revenues as a result of declining world oil prices also mean reduced resources to invest in human capital, less economic activity inside the Kingdom, and heightened expectations for the already overblown public sector to offer guaranteed employment.

Saudi Arabia also faces other, wider challenges, with implications for the Kingdom have not yet fully been explored, such as its political succession.

What’s going on with the state-owned oil company?

The decision to list a share of Saudi Aramco, a core part of the country’s economic crown jewels, on public stock markets is a potentially significant step in paving the way towards a redefined relationship between oil, the economy, and the state. Aramco’s initial public offering will be part of a wider strategy to move the country’s primary source of income from oil revenues – volatile and vulnerable to global supply-and-demand dynamics – to an income-based investment fund that can be hedged and managed like other large-scale sovereign wealth funds.

The implications thereof will almost certainly also touch on Saudi Arabia’s political position internationally, as the prospect of foreign ownership over Aramco and other key Saudi assets suggest a certain strategic interest by investing countries in the political stability of Saudi Arabia itself. But perhaps even less visibly, if current plans progress successfully, Saudi Arabia may be on the verge of re-writing its historical social-political contract, by gradually redefining the role oil and the state should play in the Saudi economy.

It is far too early to fully assess the viability this process or how exactly it will unfold. Over the coming years, we will learn whether or not the current reform process will end up opening Pandora’s box, and whether that’s a good or a bad thing.